4Q’16 Global Electronic Supply Chain – Updated Growth Estimate
Thanks to a strong showing by Dell Technologies (Chart 1) which just reported its fourth quarter financials, plus some other late reporters we have upgraded our estimate of 4Q’16 vs. 4Q’15 growth for the electronic supply chain.
Global electronic equipment growth is now estimated to have been +3.7% in the fourth quarter based on the composite financials of 232 OEMs (Chart 2). Electronic equipment sales have expanded in the last three quarters (Chart 3).
Chart 4 summarizes the growth of the world electronic supply chain in 4Q’16 vs 4Q’15
Source: Company financial reports analyzed by Custer Consulting Group
Copper Price dips as supply fears ease, but heads for second quarterly gain (Chart 5)
Copper fell more than 1% on last Friday as the end of a strike at Peru's biggest copper mine dampened supply fears that had driven the metal higher this quarter, though upbeat data from major consumer China lent support.
Workers at Freeport-McMoRan Inc. Cerro Verde facility will resume work on Friday after voting to end a near three-week strike that had halved output, the union said late on Thursday.
The re-start of the mine coincides with the Escondida mine in Chile resuming operations, ING said in a note, while there were signs that restrictions on supply from Freeport-McMoRan's Grasberg facility in Indonesia were set to ease. "Supply issues are evaporating," Commerzbank analyst Daniel Briesemann said.
"Overnight the latest news out of Peru is that the strike at the Cerro Verde mine has come to the end. Two days ago we had news there might be a solution at Grasberg, and before that, Escondida resumed production. So I think the major (supply) issues are almost done."
FREEPORT INDONESIA: The Freeport McMoRan Inc. Indonesian unit is close to reaching a deal that would allow the world's biggest publicly listed copper producer to temporarily resume concentrate exports, Indonesia's mining minister said on Thursday.
CODELCO: Chile's state copper company Codelco produced 1.83 million tonnes of copper in 2016, 1.71 tonnes of which came from its wholly-owned mines, down 1.4% from a year ago, the company said.
Custer Comment: The shortage of copper foil is another issue.
Note: Custer Consulting Group is an authorized Reuters news distributor.
North American PCB shipments were down 2.8% y/y in February 2017 and bookings increased 8.4% y/y, pushing the PCB book-to-bill ratio up to 1.04 (Charts 6 & 7)
IPC — Association Connecting Electronics Industries announced the February 2017 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Strong bookings growth pushed the PCB book-to-bill ratio up to 1.04.
Total North American PCB shipments in February 2017 were down 2.8% compared to the same month last year. This year to date, shipments are 3.4% below the same period last year. Compared to the preceding month, February shipments increased 3.4%.
PCB bookings in February grew by 8.4% year-on-year, bringing year-to-date bookings to 1.3% above the same period last year. Bookings were up 11.1% compared to the previous month.
“February’s rebound in PCB order growth was a welcome change in the North American market, which brought the PCB book-to-bill ratio back into positive territory” said Sharon Starr, IPC’s director of market research. “The recent sluggishness in PCB sales is a reflection of negative order growth in last quarter of 2016 and in January of this year. The current rebound in orders should help to strengthen PCB sales in the next several months,” she added.
Global Semiconductor market revenue increased 2% y/y to $352.4 billion in 2016 (Chart 8)
IHS Markit announced that the worldwide semiconductor market showed signs of recovery in 2016 following a down year in 2015. In 2016, the market posted a year-end growth rate of 2% with chip growth seen across multiple market segments. Global revenue came in at $352.4 billion, up from $345.6 billion in 2015.
Key Growth Drivers
Key drivers of this growth were DRAM and NAND flash memory, which grew more than 30% collectively in the second half of 2016. Key to this turnaround was supply constraints and strong demand, coupled with an ASP increase. We expect these factors to drive memory revenue into record territory throughout 2017.
Semiconductors used for automotive applications were also a key driver of 2016 growth, with a 9.7% expansion by year-end. Chip content in cars continues to climb, with micro components and memory integrated circuits (IC) leading the pack, both experiencing over 10% growth in automotive applications.
“The strong component demand that drove record capital expenditures in 2016 also provided the industry with advanced technology platforms which will support further semiconductor revenue growth in 2017,” said Len Jelinek, Senior Director and Chief Analyst for Semiconductor Manufacturing at IHS Markit.
Continuing a recent trend, the semiconductor market saw another year of intense consolidation with no signs of slowing down. The year began with the close of the biggest-ever acquisition in the semiconductor industry. Avago Technologies finalized its $37 billion acquisition of Broadcom Corp. to form Broadcom Limited, which jumped to rank fourth in terms of market share (Avago previously ranked 11th). This acquisition resulted in the newly formed company increasing its market share in several market segments, including taking a large lead in the wired application market.
“After some selective divestiture, Broadcom Limited has focused on market segments where its customer base holds dominant market share positions. These also tend to be markets which have fairly stable and visible TAM growth,” said Senior Analyst Brad Shaffer. “These characteristics may help entrench the company’s market share positions in areas where it chooses to compete,” added Shaffer.
Among the top 20 semiconductor suppliers, ON Semiconductor and nVidia enjoyed the largest revenue growth, followed closely by MediaTek. ON and MediaTek achieved growth through multiple acquisitions, while nVidia saw an enormous demand for its GPU technology as it moves into new markets and applications.
Qualcomm remained the top fabless company in 2016 while MediaTek and nVidia moved into the number two and three spots, respectively. The fabless company with the largest market share gain was Cirrus Logic, a major supplier for Apple and Samsung mobile phones. They moved up five spots in 2016, to number 10.
Intel remains in the number one spot for semiconductor suppliers, followed by Samsung. Qualcomm comes in at number three, with plans to increase its market share in 2017 with its pending acquisition of NXP.
DRAM sales expected to grow 39% to $57.3 billion and NAND flash sales to increase 25% in 2017
Huge spike in DRAM and NAND flash ASPs prompts market forecast revision to 11% increase.
IC Insights has raised its worldwide IC market growth forecast for 2017 to 11%—more than twice its original 5% outlook. The revision was necessary due to a substantial upgrade to the 2017 growth rates forecast for the DRAM and NAND flash memory markets.
IC Insights currently expects DRAM sales to grow 39% and NAND flash sales to increase 25% this year, with upside potential from those forecasts. DRAM market growth is expected to be driven almost entirely by a huge 37% increase in the DRAM average selling price (ASP), as compared to 2016, when the DRAM ASP dropped by 12%. Moreover, NAND flash ASPs are forecast to rebound and jump 22% this year after falling by 1% last year.
The DRAM market started 2017 the way it ended 2016—with strong gains in DRAM ASP. In April 2016, the DRAM ASP was $2.41 but rapidly increased to $3.60 in January 2017, a 49% jump. A pickup in DRAM demand from PC suppliers during the second half of 2016 caused a significant spike in the ASP of PC DRAM. Currently, strengthening ASPs are also evident in the mobile DRAM market segment.
With total DRAM bit volume demand expected to increase by 30% this year and DRAM bit volume production capacity forecast to increase by 20%, IC Insights believes that quarterly DRAM ASPs could still surprise on the upside in 2017. Furthermore, DRAM output is also being slowed, at least temporarily, by the ongoing transition of DRAM production to ≤20nm feature sizes by the major DRAM producers this year.
At $57.3 billion, the DRAM market is forecast to be by far the largest IC product category in 2017, exceeding the expected MPU market for standard PCs and servers ($47.1 billion) by $10.2 billion this year. The DRAM market has been both a significant tailwind (i.e., positive influence) and headwind (i.e., negative influence) on total worldwide IC market growth in three out of the past four years.
Spurred by a 12% decline in the DRAM ASP in 2016, the DRAM market slumped 8% last year. The DRAM segment became a headwind to worldwide IC market growth in 2016 instead of the tailwind it had been in 2013 and 2014. As shown, the DRAM market shaved two percentage points off of total IC industry growth last year. In contrast, the DRAM segment is forecast to have a positive impact of four percentage points on total IC market growth this year. It is interesting to note that the total IC market growth rate forecast for 2017, when excluding the DRAM and NAND flash markets, would be only 4%, about one-third of the current worldwide IC market growth rate forecast including these memory devices.
Global conductive inks market is projected to grow at over 3% CAGR to USD 1.51 billion by 2021
Global Conductive Inks Market Driven by Rising Demand for Advanced and Compact Electronic Devices
According to the latest market study released by Technavio, the global conductive inks market is projected to grow to USD 1.51 billion by 2021, at a CAGR of more than 3% over the forecast period.
This research report titled ‘Global Conductive Inks Market 2017-2021’ provides an in-depth analysis of the market in terms of revenue and emerging market trends. This market research report also includes up to date analysis and forecasts for various market segments and all geographical regions.
Conductive inks are inks with conductive properties and are used to manufacture printed devices that can conduct electricity. The rising demand for more advanced and compact electronic devices is directly impacting the growth of the global conductive inks market. These inks are used to print electronic components such as printed circuit boards (PCBs), RFID devices, and displays.
Based on product type, the report categorizes the global conductive inks market into the following segments:
- Silver ink
- Carbon nanotube ink
- Carbon/ Graphene ink
- Dielectric ink
- Copper ink
The top three revenue-generating product segments in the global conductive inks market are discussed below:
“Silver inks are the most popular product segment of the conductive inks market, generating over 35% of the overall revenue. The high utilization of silver inks in the photovoltaic cell market is responsible for the dominance of the market segment,” says Chetan Mohan, a lead analyst at Technavio for embedded systems research.
Photovoltaic cells dominate the global conductive inks market by application and are expected to continue their lead due to the increasing awareness and deployment of solar energy systems to produce cleaner energy. Silver ink also has an important role in the fabrication of electronic applications.
Polymers inks form the second largest segment of the conductive inks market. Polymer inks are used to develop PCBs with small features and layers, which are capable of being printed on top of each other for multifunctionality devices. It is also used to develop complex devices where it enhances product performance, improves reliability and quality, and reduces the overall component costs. Polymer inks are also used in medical, industrial, and automotive sectors.
Carbon nanotube ink
“The carbon nanotube ink segment of the conductive inks market is expected to grow at a CAGR of over 4% through the forecast period. Carbon nanotubes consist of strong fibers that give them remarkable electrical, thermal, and mechanical properties,” says Chetan.
Also, positive electronic properties such as the conductivity and flexibility of carbon nanotubes make them suitable to be used in developing nanoscale electronic devices. Carbon nanotubes are widely used in the aerospace and defense sectors to develop energy-efficient and powerful devices.
The top vendors highlighted by Technavio’s research analysts in this report are:
- Sun Chemical
Flexible AMOLED Display Revenues on Pace to Exceed Rigid AMOLED Panel in Q3’17 (Chart 9)
"Since 2016, however, many more panel makers have focused their efforts on increasing their supply capacity for flexible AMOLED displays. They have also tried to optimize the manufacturing process and design better structure of these panels, making flexible AMOLED display a favored choice for smartphones makers." As demand for the flexible AMOLED display continues to sharply increase, its revenues are expected to reach $3.2 billion in the third quarter of 2017, exceeding that of rigid AMOLED panels at $3.0 billion, according to IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions.
With many smartphone brands planning to apply flexible AMOLED displays to their high-end product lines, revenues for flexible AMOLED panels are expected to grow over 150% compared to 2016. On the other hand, rigid AMOLED panels, now mainly used for mid-range smartphones, are forecast to decline 2% in revenues from 2016.
“Smartphone brands believe using flexible AMOLED panels in their latest high-end products will differentiate themselves from competitors still using rigid AMOLED displays or liquid crystal displays,” said Jerry Kang, principal analyst of display research at IHS Markit.
“Samsung Electronics and LG Electronics have launched some of their flagship smartphones with flexible AMOLED displays since 2013, but have yet to become mainstream products given there was limited panel supply,” Kang said. “Since 2016, however, many more panel makers have focused their efforts on increasing their supply capacity for flexible AMOLED displays. They have also tried to optimize the manufacturing process and design better structure of these panels, making flexible AMOLED display a favored choice for smartphones makers.”
According to AMOLED & Flexible Display Intelligence Service by IHS Markit, most smartphone makers are aiming to apply flexible AMOLED displays to their products in 2017, but some of them would still find it difficult due to the higher price tag.
“Currently, the cost to make flexible AMOLED panels is much higher than that of rigid AMOLED, but it is possible that costs will fall below that of rigid panels in the future as manufacturing yield rates improve,” Kang said.
Automation study: 1 robot takes 5.6 jobs per 1,000 workers - MIT and Boston University
Treasury Secretary Steven Mnuchin raised eyebrows last week by saying he was "not worried at all," about robots taking jobs, even going so far to say, "I'm optimistic." According to Mnuchin, "it's not even on our radar screen for 50 to 100 more years."
According to a new study by researchers at MIT and Boston University, this is very wrong, and the data tell a far different story of robots driving down wages and stealing jobs. The researchers, Daron Acemoglu of MIT and Pascual Restrepo of Boston University, examined the rise of industrial robots, which increased fourfold between 1990 to 2007 or around one robot per every thousand workers, largely in the automotive and electronics industries.
That one robot, the research found, reduces the aggregate employment-to-population ratio by 0.34% age points. Translated from professor-speak, the researchers say that's equivalent to "one new robot reducing employment by 5.6 workers," a figure that factors in workers being soaked up by other industries unaffected by industrial robots. And by making the labor market more competitive, one robot can depress wages by 0.25% to 0.5%.
At the same time, the researchers note that "perhaps surprisingly, we do not find positive and offsetting employment gains in any occupation or education groups."
Mnuchin's denial isn't new, but ignores fundamental Wall Street maxim.
There is vast historical precedence for Mnuchin's optimism in the face of research like this, as economists like John Maynard Keynes worried about technological unemployment due to machines way back before World War II. But like any financial disclaimer says, past performance is no guarantee of future results.
A look around shows no telephone switchboard operators, elevator operators, assembly-line welders or video-rental stores. Now cars that drive themselves are on the road in some places.
Throughout the 2016 campaign, Trump uttered nary a word about automation, choosing instead to rail against exporting jobs to China and Mexico, but automation is becoming impossible to ignore. As domestic manufacturing has boomed, that sector's employment has declined considerably. And to throw salt in the wound, the robots taking jobs are foreign-made, a recent Wall Street Journal report noted.
Automation may be accelerating, but it hasn't reached a critical threshold quite yet. According to Acemoglu and Restrepo, the number of jobs lost to robots has been between 360,000 and 670,000 from 1990 to 2007. "However," they write, "if the spread of robots proceeds as expected by experts over the next two decades, the future aggregate implications of the spread of robots could be much more sizable."
These predictions fall into two categories, one that extrapolates things out, expecting more job and wage losses. In the other situation, "the response of employment and wages may be different once the number of robots exceeds a critical threshold," the researchers say. In other words, economists like Keynes still have a chance to be proved right.
Source: Yahoo Finance
4Q’16 U.S. GDP rose at 2.1% annualized rate instead of previously reported 1.9% Rate (Chart 10)
U.S. economic growth slowed less than previously reported in 4Q’16 due to robust consumer spending partially offset by increased imports.
U.S. Consumer confidence hits 16-year high (Chart 11)
March U.S. consumer confidence increased to a 16-year + high, suggesting the economy growing.
The Conference Board said its consumer confidence index jumped 9.5 points to 125.6 this month, the highest reading since December 2000. Consumers' assessment of both current business and labor market conditions improved sharply in March.